Re: `capitalist' character values

From: Felix Ungman (
Date: Mon Jul 23 2001 - 07:23:47 MDT

On måndag 23 juli 2001 12.26, Russell Blackford <> wrote:
>We all understand how it [corporations] works. How is it *justified*?

That's good (although i got the feeling that not everyone understand how they work).

>Felix, it is quite possible to have capitalist acts (exchanges of goods,
>services, money) without restriction, yet make no provision for limited
>liability corporations. The truth of the matter is merely: "The principle of
>limited liability corporations is central to mercantilism."

Thats correct. But not very convenient. I could in theory emulate the Corporation Act by private partnership/customer/supplier contracts. But the overhead would just be huge. However, this is not a justification in itself.

> The investor is
>getting money back if the thing makes a profit. Why isn't s/he jointly and
>severally stuck with liability for the company's torts and breaches of
>contract? (Actually, this *would* be the situation at common law.) Why
>should the government be able to pass a law allowing the investor to limit
>the risk?

That's easily justified. Unless he ownes more than 50% of the company (very common situation), he has no control of its actions. He shouldn't be held responsible for the consequences of someone elses actions. It's the foundation of common law. But this is not a justification of the corporation, just that if there such a thing as a corporation, limited liability of the stock holder is critical.

>Maybe if there were no such laws, one approach to get *some* of the benefits
>of a corporation would be for the entrepreneur, a natural person, to simply
>borrow money from various investors and remain liable for the full loss. But
>this assumes that the investors are not actually trading, they are just
>creditors - just bankers. This is not a corporation. There is still a
>natural person with full liability, unattractive as that may be to

You'll always have this option. In fact it's not uncommon for individuals entrepreneurs to do it this way. But it doesn't scale well, and is not an argument againts corporations.

>(1) where does the state get the moral authority to enter into such
>contracts? Why isn't it restricted to making contracts for the purposes of
>running the military and the police force (and a minimal court system)?

Value added services. Even today, states compete with other states to offer better legal and taxational environments for corporations. Smart minarchist states would do this even better.

>If the government passes a law that says I can't get the full amount that
>the members of a trading association owe me, isn't this theft of my chose
>in action against the members of the trading association?

How would you get your money back from a physical person? It's the same thing. In fact, with a corporation you'd be better of, because there's always a capital stock available.

>In short, what is your theory of political obligation, or government
>legitimacy? What size and shape of state is allowed by underlying ethical
>principles? What kinds of laws am I obliged to obey? What are the necessary
>and sufficient conditions before I and the state are obliged to recognise
>something as your property?

OK, I'll take your minarchist state. Works fine. But then add some valuable services that recognize commonly used contracts. These laws are to be used as "default" contracts, recognized by the state unless something else has been signed. If you want to trade with my company and don't want to obey the Corporation Act, just negotiate a new contract. (Now that's is not fully possible today.)

>(2) Felix, what do you mean "just as any other first class citizen of that
>state"? *I* sure wasn't created by a contract with the state. As far as I
>know, my parents used a totally different method! I find this very puzzling.
>Have you left something out here, perhaps?

Sorry, I slipped my mind. Either skip that part, or append "should be".


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